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How Delivery Apps May Put Your Favorite Restaurant Out of Business (newyorker.com)
In a piece this month, The New Yorker argues that online food discovery and delivery platforms are bad for restaurants. From the report: In recent years, online platforms like Uber Eats, Seamless, and GrubHub (which merged with Seamless, in 2013) have turned delivery from a small segment of the restaurant industry, dominated by pizza, to a booming new source of sales for food establishments of all stripes. When the average consumer logs in to the Caviar app to order a Mulberry & Vine salad for the office or a grain bowl on the way home from work, she might reasonably assume that her order is benefitting the restaurant's bottom line. But Gauthier, like many other restaurant owners I've spoken to in recent months, paints a more complicated picture. "We know for a fact that as delivery increases, our profitability decreases," she said. For each order that Mulberry & Vine sends out, between twenty and forty per cent of the revenue goes to third-party platforms and couriers. (Gauthier initially had her own couriers on staff, but, as delivery volumes grew, coordinating them became unmanageable.) Calculating an order's exact profitability is tricky, Gauthier said, but she estimated that in the past three years Mulberry & Vine's over-all profit margin has shrunk by a third, and that the only obvious contributing factor is the shift toward delivery.
"between twenty and forty per cent of the revenue goes to third-party platforms and couriers. (Gauthier initially had her own couriers on staff, but, as delivery volumes grew, coordinating them became unmanageable.)
that the only obvious contributing factor is the shift toward delivery."
So they decided to pay 20-40% to have other people co-ordinate, and now they are complaining.
It seems obvious to me that if delivery isn't profitable, your business shouldn't be offering it.
"Enjoy our fantastic food in a friendly atmosphere tailored for your enjoyment."
A real restaurant is a different business than someone hauling food down the street in a cardboard box on a bicycle. Just like a movie theatre is a different business than a video rental shop.
If you're a zombie and you know it, bite your friend!
I think that most of a restaurant's profit comes from serving drinks. Home delivery really cuts into this high profit item.
I think that the point is that "reasonable" prices will cause a lot of customers to balk.
If the alcohol sales essentially subsidize the food sales, then raising the prices for those food items may cause a lot of patrons to choose other places. I have a feeling that this is pretty likely to be a problem since already prices are rather high, and portions are already ridiculously large in order to justify the high prices. The actual raw ingredient costs are very low, it's facilities, utilities, labor, and probably marketing that take a lot of the revenue. Restaurants have to serve the oversized portions because that allows them to reach the price point where it's not a loss.
When I look at my local Mexican restaurant market, the quality difference between fairly low-end food and fairly high-end food is not really all that extreme. It's enough that I generally prefer the higher-end places (they do a better job of not overcooking things and having the final dish not be as greasy) but the biggest differences are in the facilities, lower-end places are often in former-fast-food locales and the dining rooms are pretty rough. The low end places don't serve alcohol. While their prices are lower than the high-end places, they're really all that much lower. I could see the high-end place having to raise prices fairly substantially if alcohol sales don't help support the restaurant.
Do not look into laser with remaining eye.
but they're 0-value adding middlemen
Except that isn't really true is it. You might not find much value in it personally. I would agree when at home I know what restaurants are around and can just easily pick up the phone or go to their websites directly; assuming I wanted to order ahead or get something delivered.
On the other hand when traveling its a different matter. Frequently I get into some city or part of city I have never been to before. I don't always rent a car if I am only visiting a client for day or two. So I have taken a cab or uber to a hotel. Gee something to eat would be nice... So seeing all my options in once place IS of value. It is something I as a consumer want.
Repeal the 17th Amendment TODAY! Also Please Read http://www.gnu.org/philosophy/right-to-read.html
The problem is that online makes a commodity out of everything. The delivery services are positioning themselves as middlemen and will make the restaurants essentially anonymous and interchangeable. With commoditization comes price pressure. Intuitively you'd think that the competition would create a meritocracy where restaurants can attract customers with quality, but like with everything else online, there are going to be a small number of "winners" who take the top spots, and a long tail of "losers", all alike. Nobody wants to order from the second best. That's why there's Google and some niche search engines. That's why there's Facebook and some niche social network sites. That's why there is Amazon and some niche postal services. Oops, too soon?
Most of the overhead is in staffing and rent, so anything that lowers those substantially is a huge win.
What are you thinking?
Do you imagine that when a restaurant turns into a delivery service they don't need to rent a location near their customers, they can instead opt to locate their facilities in a low-rent section of town simply drive longer to deliver your food?
What staffing is eliminated? For every minimum wage worker that used to sweep the dining area, bus tables and clean the bathrooms a restaurant will likely need a team of "gig economy" drivers to hand-deliver your order.
Ken
Most restursnts don’t offer takeout.
Bullcrap. Nearly all restaurants offer takeout. They may not advertise or promote it, but if you call them and ask if they can box up an order to go, very few will decline the order. Chinese, burger, and pizza joints get most of their orders takeout. Even high end restaurants typically have 20% or more takeout.
Delivery is unquestionably an added-value service.
Prices should reflect that.
If delivery is affecting margins negatively, it is not priced correctly. At the very least, it should end up revenue-neutral.
I've fallen off your lawn, and I can't get up.
If smaller independent restaurants can't stay afloat, then it will destroy all diversity in the restaurant industry. That's a big downside.
Laws are rules for the court, but merely a bottom bar to hit for life. Think beyond laws in your actions always.
If all your customers demand take-out, and you lose money on each take-out meal, you still go bankrupt.
The restaurants don't "lose money on each take-out meal".
Businesses have variable costs, such as the ingredients and labor going into each order. They also have fixed costs, such as rent. The takeout orders generate more income than the variable costs, so they add to the total profit. But the problem is that they don't contribute enough profit to pay the rent at the end of the month.
If your customers switch from eat-in to takeout, you may go bankrupt unless you can cut costs, but if you refuse those orders, you will go bankrupt even faster.